Graphex Mining’s Move On Funding Of Chilalo

Graphex Mining Limited (ASX: GPX) is an Australian company engaged in the exploration and development of the mineral resources, strongly focused on Chilalo Graphite Project located in the south-east Tanzania. Being a host to high-grade mineral resource, Chilalo holds an extensive ability to produce a premium graphite concentrate with a substantial portion of the coarse flake Shimba graphite deposit. The graphite at the site possesses outstanding expandability characteristics making it well suited for rapidly growing graphite market. The company is in the process of completing the financing transaction. This transaction will be the major milestone for the company in placing it as the leading supplier of premium, coarse flake graphite.

The company has entered into a loan note subscription agreement to raise US$5 million with its funds managed by global private investment firm Castlelake, L.P. The term sheet with proposed terms for the Castlelake funds and other market participants will provide up to US$40 million in equity and up to US$40 million from the issue of senior secured loans. This has been signed by the company now.Â

50 percent of the senior fund will be provided by the way of secured loan notes, Debt/equity ratio will not exceed 50/50. Having met all the conditions to the senior funding package, the company will than initiate for an equity raising and depending on the market conditions will set a target to limit the Castlelake funds to 40% of the total issued share capital. The pricing of the equity raising is subjected to a ceiling price of $0.28 per share. The company will provide an opportunity to the existing shareholders to participate in the equity raising on the same terms as the Castlelake funds.

Proceeds from the equity investment and the Senior Secured Loan Notes will be used to fund the construction and development of the Chilalo Project.

Proceeds from the Interim Loan Notes will be used to position the Project for construction, by funding activities that will facilitate the satisfaction of conditions precedent to the Senior Funding Package. The final financing amount for the Senior Funding Package will be determined by the BFS and is expected to fund all associated costs and allowances typical for the construction of a mining project.

Mine closures and overall threat to the mining industry in china is the result of major crackdown faced by the Chinese government. Historically, China which accounted for 70% of the coarse flake supply is now under major threat on account of environmental restrictions, resulting in diminishing of majority of its coarse flake graphite reserves.

The company is working on a loan amount of approximately $112 million to take its “Chilalo” project in Tanzania to the production line. However, the company needs to complete final feasibility studies and contracts with the buyers and mining contractors before the final approval for the loan is made to it. Issues regarding Tanzania’s mining also need to be resolved before final loan approval.

Final loan approval after existing problem resolutions and bankable feasibility study will complete this transaction affirming the quality of the Chilalo project, the premium product it will produce and helping the Company in becoming a leading supplier of premium, coarse flake graphite. The shares of the company traded at the levels of $0.27.


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